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Minimum Wage Hikes are a Terrible Idea

In 2013, the average Pizza Hut restaurant had revenue of $861,000. I just went to a Pizza Hut restaurant in New York State a few weeks ago, and my bill was about $24, tip not included. So if that restaurant served 100 people like me a day, it would add up to about $861,000 for the year. It all sounds reasonable.

A Pizza Hut restaurant is not much different from a McDonalds, or a Subway, or any other fast food restaurant. If they do more than a million dollars a year, it’s phenomenal. Most are struggling along. Many barely make it.

Having government raise the minimum wage from say $8 to $15, almost doubling the payroll, will surely put many restaurants out of business. Many are starting to add kiosks now so customers can order on a screen, without a human assisting. I have seen kiosks on tables at Olive Garden, I have ordered at a kiosk at Panera, and I recently saw that McDonalds is adding kiosks for customers.

Raising the minimum wage on restaurants for low-skilled or unskilled laborers is not solving the problem. We like to talk about everyone “deserving a living wage.” Those rich employers just have to make it work. Tell that to the owner of the Pizza Hut, who barely makes ends meet, and sometimes has loss years because he can’t get enough customers every day (remember, he needs a 100 every day of the year).

There are people with college degrees working as paramedics, firemen, teachers and yes, soldiers, who start out making $16 an hour. That’s what these jobs pay at the entry level. Compare that to the skill you need to flip a burger – something you can learn in a few days, and tell me again that everyone “deserves” $15 an hour.

It just does not work that way.

Forcing employers to pay higher wages to low-skilled employees inflates their costs and ends up with one of two results:

They go out of business since they can’t make ends meet.

They lay off staff or shorten their hours and bring in kiosks or other automation.

Both result in job loss. Fewer service jobs. More unemployment for low-skilled workers. More dependency on government handouts. Fewer jobs in the country. Higher prices for basic goods and services.

Raising the minimum wage for low-skilled workers sounds like a noble thing. After all, everyone “deserves a living wage.”

Nonsense.

Those that obtain an education and plan a career where workers are needed and therefore the pay is high will get that higher pay.

We have a terrible shortage of doctors, nurses, engineers, computer programmers, and many other professional careers that pay six figures each. Nobody deserves a living wage. The economy, the collective “all of us” are willing to pay doctors, nurses, engineers and computer programmers a lot of money because those jobs are hard, they are stressful, they have long hours, and they require many years of education.

The solution to our economic problems are not government subsidies, or regulatory interference. That never works. The solution to our problems is education.

On the other hand in the last 35 years CEO vs the average worker pay ratio has risen from 42% higher to 373% higher. While during that same period their marginal tax rate has decline from 70 to 35%. I agree that raising the minimum wage is not the most efficient way to accomplish equity in society but until the above trend is somehow reversed this seems to be the go to tactic.

Regarding education in the US, I think our policies, culture and history make a university grade education a non-option for many people. Especially kids coming from families with generations of members who never went to college. Up until the 80’s having a college education was not necessary to live a comfortable lifestyle in this country. It is today but attitudes have changed very little so far. Also the fact that in the US college tuition has risen much higher the the cost of living and the availability of aid is much lower in the US than in other developed countries adds additional impediments for all but the most motivated middle class or poor students. I don’t really subscribe to the idea that Americans do not work hard enough as espoused by many in the political class these days.

This is definitely a multi-facted problem that deserves an omnibus solution. I am just not sure the US has the attention span to deal with this issue in any other way than bandaids like Minimum Wage legislation.

Well, the CEO argument is often given in this context, yet it has nothing to do with the pay that workers earn. First of all, the CEO pay that we’re talking about here is greatly distorted by guys that run JPMorgan, HP, Wells Fargo, etc. The vast majority of CEOs are on the low side of this curve. Of course, I am a sample of one, but I am a CEO, and I am not even the highest-paid person in our company.

I agree that this is a multi-faceted problem with many factors. I chose here to zero in on the minimum wage, and how it is held up as a solution – and I strongly disagree that it actually is. I think raising minimum wage does more damage to the country than it does good – over a 20 year cycle, for some of the reason I have cited here.

Yes, cost increases drain the economy. And, a drained economy is what we have today. This is easier said than to act upon.

We need a stable economy. Somehow we must bring our manufacturing back from China or raise taxes on businesses that outsource. My answer is no wage increases and cut living expenses to 1/2 or more. Then Americans can start some processes of recovery and relief. America’s debt which is increasing to more than 18 trillion should not prevent us from creating. USA Only economy. Banks and Capitalist who deal in offshore investing and outsoucing, should pay the 18 + trillion debt. Eighteen+ trillion dollars is a lot of money, but capitalist, banks, government officials and politicians have robbed and deprived the American people and continue to do so.